The Broadbent Blog


Review: Ontario's Economic Outlook and Fall Fiscal Update 2018

The Ontario government’s annual Economic Outlook and Fall Fiscal Update arrives on the heels of a controversial first quarter for Premier Doug Ford’s new Progressive Conservative government. Campaigning solely on a message of reversing the legacy of the Ontario Liberals’ time in government — primarily by reducing government spending and making life more “affordable” for Ontarians, Ford’s first five months has largely resulted in service, democratic and economic disruption, instead of actual cost-savings that would benefit average Ontarians.

The first few months have racked up a list of costly decisions. At the top are interfering in Toronto’s municipal election and its government structure; reversing the $15 minimum wage and other workers’ rights; rescinding Sex-Ed and Reconciliation curriculum; cancelling green energy contracts; delaying the service delivery of Ontario’s cannabis industry; and, abruptly halting social assistance reforms. As a result, Ontario’s political/economic reality reflects an ideology rooted in a merciless, autocratic brand of conservative populism that surpasses even the minimal efforts of Mike Harris’ adherence to basic democratic norms, respect for the judiciary, and just plain, fiscal common sense.

This year’s fiscal update is an opportunity to compare and contrast the previous Liberal government’s 2017 review and 2018 provincial budget, with the current government’s plan; helping to summarize and better assess what’s been lost and the advocacy needed to achieve an inclusive economy for all.  

 

Summary

In the 2018 Fall Outlook and Fiscal Review, Ford’s ‘Plan for the People’ focused on lowering the deficit, reducing the cost of government and increasing business investments. When unpacked, this year’s review includes a long list of cuts to vital services, along with misplaced attention and resources on key issues. A substantial amount of the government’s priorities are focused on derailing or eliminating the progressive initiatives introduced by the former Liberal government in their 2017 Fiscal Update and subsequently their 2018 Budget. The previous update by the Liberal government focused on addressing and eliminating barriers that contributed to economic exclusion, particularly for women, young people and those with low-incomes. Ford’s government attacks many of the resulting government programs and spending initiated in the 2017/2018 fiscal year; particularly in the areas of housing, labour reforms and carbon pricing.

 

Carbon Pricing

Transitioning to a low-carbon economy that is compassionate towards workers and businesses in Ontario’s resource, energy and manufacturing sectors is more critical than ever. The manufacturing sector makes-up 12 per cent of Ontario’s economy, while all three industries combined employ over 850,000, according Statistics Canada. The former Liberal government made a political statement when they announced plans to enter into a trilateral agreement with California and Quebec to reduce carbon emissions. The short-lived Cap and Trade program was set to reduce emissions by 8 to 10 megatonnes by 2020, and lay the groundwork towards a sustainable future, all while supporting industries and workers through the transition.

Ontario’s Cap and Trade Program was a small part of a larger effort by the federal government to reduce carbon emissions across the country. The cancellation of the program by Ford’s government means Ontario will have to adopt the federal government’s Carbon Fee and Dividend program to ensure carbon emissions are reduced. Ford’s chosen to make fighting climate change a partisan issue, ignoring science and evidence pointing to the need for urgent action. A recent report by the Intergovernmental Panel on Climate Change (IPCC) warned of the dangers and extreme weather associated with a 1.5 - 2C degree increase of global temperatures. With the cancelling of the Cap and Trade program, Ontario lost its opportunity to have a carbon pricing plan that best suit its needs. It’s more important than every to fight for an alternative carbon plan, whether tailor-fit for Ontario or a part of larger national strategy to reduce carbon emissions and aid in the just transition of workers in affected industries.

 

Workers’ Rights

The rising cost of living and the changing nature of work clearly demonstrates needed updates to Ontario’s labour laws. Despite, Ontario’s unemployment rate being the lowest it’s been in 18 years, at 5.6 per cent, tens of thousands of part-time jobs were created at the loss of full-time employment. Part-time workers, prior to enactment of the Fair Workplaces, Better Jobs Act, 2017 were likely to have less benefits, differential work conditions, and lower pay than in comparison to equivalent full-time work. The $15 minimum wage increase, that began with the initial increase of $14 an hour, ensured that over half a million of Ontarians were paid fairly. Raising the minimum wage helps to close the income gap by putting more money in pockets of workers and less in the hands of big businesses and employers.

This year’s review highlighted the government’s new legislation to replace the Fair Workplaces, Better Jobs Act, 2017 with the Making Ontario Open for Business Act, Bill 47. Once passed the bill will:

  • Halt the minimum wage increase, keeping it at $14 an hour, pegging it to inflation after 5 years;
  • Introduce 8 unpaid personal leave days instead of 10 personal leave days, 2 of which were paid;
  • Remove the requirement for four days’ notice for scheduling and on-call pay; and
  • Remove equal pay for equal work.

Along with needlessly delaying the Pay Transparency Act, Bill 47 erodes decades of labour organizing — making the working conditions of Ontarians not much better off than before.

 

Housing

In the 2018 provincial budget, the Liberal government earmarked $0.2 billion over three years, towards the federal government’s National Housing Strategy - an already approved program that relies on the partnership of provincial/territorial governments to invest in building housing across the country over the next 10 years. This year’s review makes no mention of the National Housing Strategy, nor signals the continuation of any ongoing relationship with the federal government on housing. Instead, the provincial government’s new Housing Supply Action Plan, begins a new consultation process on housing solutions. This further delays the urgent need to invest in housing and removes a key sustainable funding partner (the federal government), which helps to ensure the effectiveness and long-term success of any provincial housing plan.

 

Taxes & Lost Government Revenue

Low-income Tax Exemption

This year’s review purported to include provisions to help increase/retain the wages of low income Ontarians. The government’s decision to exempt individuals making $30,000 or lower from paying personal income taxes, on the surface, may appear to be a compassionate gesture. But an analysis on whether a tax exemption or a $15 minimum wage increase would be more beneficial is warranted.

In a hypothetical scenario that saw the $15 minimum wage come to a fruition, with the existing personal income tax rate of 5.05%, a full-time, minimum wage earner, with an hourly income of $15 an hour, could make on average $30,000 a year. Minimum wage earners in this scenario would pay $1,515 a year in provincial personal income taxes, with an after-tax income of $28,485, before the federal personal tax rate is applied. The government’s new tax exemption, allows individuals who make $14 an hour, with an average full-time salary of $27,000 a year, to only be subjected to a federal income personal tax rate of 15%. On average, these workers could receive an annual full-time salary of $27,000, before the federal personal tax rate is applied. In sum, the Low Income Individuals and Families Tax (LIFT) Credit, will leave Ontarians with less, not more money than if the $15 minimum wage were to be implemented.

 

Personal Income Taxes

This year’s review saw the cancellation of an on average $200 tax increase for those with incomes between a new tax bracket of $71,500 and $220,000, resulting in $275 million in lost government revenue. The elimination of the lower income tax bracket, through LIFT, combined with the surtax on those with higher incomes, results in the government forfeiting at least $770 million in revenue.

 

Cap and Trade Revenue

According to the province’s Financial Accountability Officer’s report, the cancellation of Ontario’s Cap and Trade program would result in a loss of $1.5 billion in government revenue this year alone.

The government stated in its fiscal review that it will not raise taxes, giving it very little room to recoup its losses without enacting service cuts. This lost revenue could have instead been redistributed to reduce inequality, making investments in housing, transit, social services and other poverty reduction measures.

 

Government Oversight & Accountability

This year’s fiscal review eliminated two key civilian oversight and government accountability bodies, transferring their responsibilities to other departments. The Environmental Commissioner was responsible for assessing the impact of environment and climate change on the province, while the child advocate was necessary to ensuring that vulnerable children and youth were defended and represented. This move has decreased transparency and has stifled efforts to make government accountable to the public.

 

Moving towards an inclusive economy                  

Ford’s economic agenda makes life less affordable for Ontarians. This year’s review focused on providing the public with perceived short-term financial gains rather than an approach that will be cost-effective and benefit Ontarians in the long-run.

In sum, the new Ontario government unsurprisingly adopted a drastically different approach to managing Ontario’s economy. Despite, the Official Opposition’s on-going advocacy and defense of the aforementioned service cuts — additional external pressure is needed to ultimately restore and redirect the government’s approach.

The organizing by $15 and Fairness, which spans across the province and spearheaded by community and grassroots support has been instrumental in ensuring there wasn’t a complete rollback of the Fair Workplaces, Better Jobs Act, 2017. An inclusive economy, one we all should strive for in Ontario, should address growing inequality and affordability concerns in the province, while outlining a pathway to achieving economic growth and prosperity for all. This cannot be achieved by cutting and/or keeping tax rates low, especially, at a time when critical investments in healthcare, housing, transit, social services and poverty reduction measures are needed. With the federal government set to release their Fall Economic Update this week, additional pressure lies to redress some of the harmful economic impacts done by Ontario’s government.

 

Brittany Andrew-Amofah is the Senior Policy and Research Analyst at the Broadbent Institute.

Photo by Peter Damian used under a Creative Commons license.